PROBATE AND WILLS
Dealing with the estate of a deceased individual is a complex process under any circumstances. When the estate includes assets in multiple countries or the deceased had ties to more than one legal jurisdiction, it becomes even more intricate. International probate and wills law governs the processes involved in handling such estates, ensuring the orderly transfer of wealth and the respect of the deceased’s last wishes across borders.
This guide covers the fundamental aspects of international probate and wills law, focusing on four key areas: Inventory and Sharing, Testament, Succession Planning, and Family Holdings. Understanding these elements is crucial to avoiding disputes, minimizing tax burdens, and ensuring a smooth transfer of assets in cross-border scenarios.
Inventory and Sharing in International Probate
Inventory and Sharing are essential processes in any probate case, and they become more complicated when multiple jurisdictions are involved. Probate refers to the legal process by which a deceased person’s estate is administered, including the collection of assets, payment of debts, and distribution to beneficiaries.
Inventory of Assets Across Borders
The first step in any international probate case is creating an inventory of the deceased’s assets, which may include property, bank accounts, investments, and other valuables located in different countries. The inventory process varies based on the legal requirements of each jurisdiction and often necessitates cooperation between legal professionals in different countries.
• Identification of Assets: In an international context, it’s essential to determine where all assets are located. Assets in foreign bank accounts, real estate in different countries, shares in overseas companies, and other global investments must be identified and valued.
• Classification of Assets: In many cases, local laws distinguish between movable and immovable assets, with each type being subject to different inheritance rules depending on the jurisdiction. Real estate is often governed by the laws of the country where it is located, while movable assets like cash, stocks, and bonds may be subject to the laws of the deceased’s domicile or habitual residence.
Valuation of Assets
Once the assets are identified, they must be valued according to the laws of each country involved. The valuation process may require the services of local appraisers and financial experts, and it’s essential to ensure that assets are appraised in compliance with the legal standards of each jurisdiction.
• Currency Conversion: Since assets located abroad may be valued in different currencies, an important aspect of international probate is converting these valuations into a common currency for accurate accounting and reporting.
• Tax Considerations: Depending on the country, estate or inheritance taxes may apply, often requiring careful consideration of how assets are divided to minimize tax liabilities. The tax laws of the deceased’s country of domicile, the location of assets, and the country of the heirs all need to be considered.
Sharing of the Estate
Once the inventory and valuation of assets are complete, the estate must be distributed to the heirs or beneficiaries according to the will or, if no will exists, based on the intestacy laws of the relevant jurisdictions.
• Forced Heirship vs. Testamentary Freedom: Different countries have different rules regarding the distribution of estates. Some, like the United States and the United Kingdom, grant individuals more freedom to distribute their estates as they see fit. Others, particularly civil law countries like France or Spain, impose forced heirship rules, which require a certain portion of the estate to go to close family members, regardless of the will’s provisions.
• Cross-Border Conflicts: In cases where multiple jurisdictions apply, disputes may arise regarding which law governs the distribution of assets. Courts in different countries may issue conflicting rulings, particularly when dealing with properties like real estate, where local laws generally apply. It’s crucial to rely on experienced legal professionals who can navigate these conflicts and ensure that the estate is distributed as fairly and efficiently as possible.
Testament (Wills) in International Probate
A testament, or will, is a legal document that outlines how a person wishes their estate to be distributed after their death. In the context of international probate, drafting and executing a valid will requires careful consideration of multiple legal systems to ensure that the document will be enforceable across jurisdictions.
Creating a Valid International Will
The process of creating a will that is valid internationally can be complex, as different countries have varying requirements for validity. The legal principle known as “conflict of laws” can often apply, meaning that the laws of more than one jurisdiction may influence the enforcement of the will.
Key Considerations:
• Choice of Law: Many countries allow individuals to specify which country’s laws will govern their estate. For example, under the EU Succession Regulation (Regulation No. 650/2012), European Union citizens can elect for the law of their nationality to apply to their estate, rather than the law of their residence. This election can provide greater clarity and reduce disputes.
• Formal Requirements: Each jurisdiction may have different requirements for a will to be considered valid. For example, some countries require that wills be notarized or witnessed by a certain number of people. Others may enforce requirements about the form of the will, such as whether it must be written by hand or can be typewritten.
• Multiple Wills: In cases where assets are held in multiple countries, it may be advisable to create separate wills for each country to ensure that the will complies with local laws. However, careful coordination is required to prevent conflicting provisions or unintended consequences.
Types of Wills in International Contexts
In international probate, the following types of wills may be relevant:
• International Will: Recognized under the Convention Providing a Uniform Law on the Form of an International Will (1973), the international will is designed to be valid across all participating countries. It simplifies the process of creating a single will that can be enforced in multiple jurisdictions, though not all countries recognize this format.
• Multiple Wills: For estates with significant assets in several countries, it may be practical to draft separate wills for each jurisdiction. This approach allows for greater adherence to local laws, but the risk of conflicting provisions must be managed carefully.
• Joint Wills: While less common in an international context, joint wills (where two people, often spouses, make a will together) can be used in certain circumstances. However, their enforceability in international settings can be challenging due to differing legal standards.
Executing the Will Across Borders
Once the will is in place, executing it across multiple jurisdictions requires attention to each country’s probate process. This often involves applying for probate (or the equivalent process) in each country where the deceased held assets, and complying with local laws regarding the transfer of property and assets.
Succession Planning in International Estates
Succession planning involves the preparation of the orderly transfer of assets and wealth to the next generation, minimizing legal disputes and tax burdens. In an international context, succession planning becomes even more crucial to avoid the complexities of cross-border inheritance and ensure that beneficiaries receive their inheritance with minimal delay.
Key Elements of International Succession Planning
• Tax Planning: Each country has its own laws regarding inheritance and estate taxes. In many cases, both the country where the deceased was domiciled and the countries where assets are located will attempt to tax the estate. Proper succession planning can help minimize double taxation through the use of tax treaties or by structuring assets in a way that reduces liabilities.
• Trusts and Foundations: International trusts and foundations are common tools used in succession planning, particularly for high-net-worth individuals with assets in multiple countries. These structures allow individuals to transfer assets during their lifetime, while retaining control over the distribution of those assets upon death. Trusts, in particular, can be useful for avoiding probate, reducing tax liabilities, and providing greater privacy for the estate.
• Pre-Mortem Transfers: One strategy to reduce the complexities of international probate is to transfer assets to heirs during the individual’s lifetime. Gifting assets can reduce the overall value of the estate, potentially minimizing taxes and avoiding forced heirship claims. However, this must be done carefully to avoid triggering gift taxes or other unintended legal consequences.
• Life Insurance Policies: Life insurance can be an important tool in international succession planning, as it provides liquidity to pay estate taxes, legal fees, or other expenses that arise during probate.
Mitigating Forced Heirship Rules
In many civil law countries, forced heirship rules dictate that a certain portion of the estate must go to close family members, such as children or a spouse. These rules can complicate the transfer of assets in international probate cases, particularly when the testator intended to distribute assets differently.
Succession planning can involve strategies to minimize the impact of forced heirship, such as placing assets in trusts or choosing a jurisdiction with more flexible inheritance laws.
Family Holdings in International Probate
For high-net-worth individuals, family holdings—including family-owned businesses, real estate portfolios, and investments—often represent a significant portion of the estate. Managing these assets in the context of international probate law requires careful planning to ensure their smooth transition to the next generation.
Corporate Structures and Family Holdings
Family-owned businesses and investments are often held in corporate structures such as holding companies or family offices. These entities provide a level of protection and continuity for the business or investments, but they also add layers of complexity to international probate cases.
Key Considerations for Family Holdings:
• Succession of Business Ownership: In family-owned businesses, it’s essential to plan for the succession of leadership and ownership to ensure the long-term survival of the business. This can involve setting up shareholders’ agreements that outline how shares will be transferred or bought back upon the death of a shareholder.
• Governance Structures: Corporate governance structures can provide clear guidelines on how family-owned businesses should
